Federal crisis aid may pay for demolition at cost of moving people into homes

North Las Vegas' proposal, joined in by Clark County, is the only one in the area that calls for using federal foreclosure crisis aid to demolish housing. Officials say the government limits what they can do with the money, and this is the best plan for North Las Vegas' future.

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North Las Vegas wants to spend about $7.6 million of foreclosure crisis aid money to buy and demolish a failed apartment complex, the only idea of its kind among the plans for the $54 million allocated to Southern Nevada.

A divided North Las Vegas City Council chose the Buena Vista Springs apartments over a plan that would have helped more people buy foreclosed homes.

Opponents of the plan say it is not the best way to deal with the worst foreclosure rate in the nation. The question is: Will tearing down empty properties and replacing them with better ones improve a neighborhood, even if the result is less housing, or is it better to help as many people into foreclosed houses as quickly as possible?

If the Housing and Urban Development Department approves the Buena Vista proposal, the project would be the only major one in Southern Nevada involving demolition of housing. North Las Vegas and Clark County propose spending much of the rest of their “neighborhood stabilization” money on helping people buy foreclosed homes. Las Vegas proposes spending the lion’s share of its $20 million allocation on helping people into houses.

North Las Vegas City Councilman Robert Eliason said his city originally considered two approaches to spending its $8.6 million share of the federal aid. The main component of one plan would have provided $20,000 each for 290 individual purchases of foreclosed homes. The one chosen by the council, however, reduces the buyers’ assistance to 150 foreclosed homes, spends $4.6 million on buying Buena Vista and calls for the county to kick in an additional $3 million for Buena Vista.

Eliason said his main objection to the Buena Vista package is that it offers less direct help to people.

“I’d prefer to help 290 single-family-home buyers,” he said. “That’s what it’s (the funding) designed to do.”

Councilwoman Stephanie Smith, who also voted against the proposal, said Buena Vista is not the right use of the money.

“I voted against it because I think this money should go to homeowners,” she said. “Buena Vista has been a blight for years. But I don’t think it has anything to do with the foreclosure crisis.”

As administrator of North Las Vegas’ Neighborhood Services Department, Kenny Young would oversee the Buena Vista project. He said there was a lot to consider with both options.

On the paperwork listing the pros and cons of the two options, city staff listed six items in favor of the Buena Vista plan. As for the other plan, it had one thing in its favor: “meets ... guidelines.”

Young said one of the considerations was that buying a lot of foreclosed houses and selling them at below-market rates could lower property values in those neighborhoods.

Buying and demolishing Buena Vista, then building something better on the site, would help “maintain lower crime rates” in North Las Vegas’ “most unstable neighborhood,” and would attract new investment into the neighborhood, according to the city staff presentation.

“So how do we best stabilize neighborhoods?” Young asked, echoing the name given to the vehicle for the federal money, “Neighborhood Stabilization Program.”

The money came from federal legislation approved in July, with nearly $4 billion passed out nationwide based on state-by-state foreclosure and subprime mortgage rates, as well as the number and percentage of homeowners in default.

The funding is being handled with greater speed than most federal programs; Clark County, North Las Vegas, Las Vegas and Henderson must receive all public comment and then approve their respective plans in time to submit final drafts to HUD by Dec. 1.

The Clark County Commission is to vote Tuesday on its joint proposal with North Las Vegas, which includes the Buena Vista project.

Brian Sullivan, a spokesman for HUD, wouldn’t comment on the value of one approach or another for using the funds, but noted that the law allows states and municipalities to buy foreclosed houses, help first-time homebuyers or demolish blighted, foreclosed properties.

Young said tearing down Buena Vista would not leave the surrounding community with less housing. Rather, he insisted, “We’re losing blighted housing, not housing that we consider usable.”

Buena Vista is no stranger to HUD money either.

In the city’s proposal, an attachment notes that the area received an average of nearly two calls to North Las Vegas Police daily for at least five years — until late 2007. Then owner Creative Choice West failed its fifth HUD inspection in four years. The federal agency removed a $212,000 monthly subsidy it had been giving to about 800 occupants of 233 apartments, and, together with other agencies, used Section 8 rental vouchers to relocate most of them to all parts of the valley.

Since then, according to Young, most of those apartments have been unoccupied and boarded up. Calls to Florida-based Creative Choice West were not returned. Jeffrey Cogan, a Las Vegas-based lawyer who represented Creative Choice during summer 2007, this week said he was suing the company for $1,875 in unpaid fees. And North Las Vegas’ proposal indicates that Buena Vista entered the foreclosure process in September.

It also says the neighborhood surrounding Buena Vista is at a “tipping point” and that without demolishing Buena Vista, “the community may never recover from this foreclosure crisis.”

County Commissioner Lawrence Weekly, in whose district Buena Vista sits, thinks the proposal “makes sense” because getting rid of the apartments there would make the neighborhood more attractive to homebuilders in the future.

Weekly, like Young, noted there were a great number of restrictions on using the federal money and little time to come up with a proposal.

The county commissioner also said he wished the legislation authorizing the funds would have allowed local governments to offer direct help to people who had lost their homes to foreclosure, instead of focusing on neighborhoods and houses.